Citizens' Bill Adds CAT, Passes Senate Budget Committee

A proposal to shift the way the
state-backed insurer pays claims is on
its way to the Senate floor after being
changed to lower the state's overall
risk following a major storm.

By unanimous vote, the Senate Budget
Committee on Saturday approved a measure
(SB 1342) that reduces the immediate
assessments to shore up Citizens
Property Insurance Corp. and gives the
state and insurers more time to raise
the funds necessary to pay off claims.
Backers say that and other changes may
make it more attractive for other
private insurers to come into Florida
and reduce the number of Citizens'
policies, which now stand near 1.5
million.

"This bill does not change Citizens'
liability to pay claims after a storm,"
said Senate sponsor Steve Oelrich,
R-Cross Creek. "It only addresses how
Citizens collects to pay those
liabilities."

The bill reduces Citizens' regular
assessment from 6 percent per account to
2 percent for coastal property owners
and eliminates it altogether for
Citizens' personal lines account and
commercial policyholders.

To make up the loss, the bill imposes
greater levies using emergency
assessments, which are charged on most
lines of property and casualty policies
in the state, including Citizens’ own
policies. (Workers' compensation and
medical malpractice policyholders are
not assessed.)

The bill would also allow Citizens to
levy assessments directly to
policyholders. Under current law,
insurance companies are required to
write a check to Citizens within 30 days
after initial assessments are sent out
and then collect that back from
policyholders after the fact.

The bill was amended to include another
hurricane-related issue: the Florida
Hurricane Catastrophe Fund. The
state-backed fund is responsible for
reimbursing insurance companies and
their policyholders for up to $17
billion in losses following a major
storm that leaves companies unable to
pay claims.

The amendment would shrink the hurricane
fund over a three-year period from $17
billion to $15 billion, a move that
would reduce the risk on Florida
taxpayers. The move is expected to
result in a small increase in premiums,
maybe 2 percent, that Alexander said is
justified by the improved stability of
the fund.

The decrease could also mean additional
business for the private reinsurance
market.

Alexander said the change is needed
because given the tight credit market,
Citizens would already be unable to
obtain up to $17 billion from the bond
market, much less be able to reimburse
policyholders if a second storm hit.

The amendment and the bill have the
support of the Office of Insurance
Regulation, Citizens board members, the
governor's office and the state's
leading business groups. It is also
supported by the Florida Insurance
Consumer Advocate.

"It would be irresponsible not to adjust
Citizens insurance the best we can to
attract other companies," Oelrich said.
"It is also going to put some money away
-- literally -- for a rainy day."

The House companion bill (HB 1127) does
not contain the CAT fund language. That
bill was approved by the House and is
now in messages.